How AT&T Is Challenging Net Neutrality With Its New Internet TV Service

A few weeks ago, federal regulators sent AT&T a letter urging the company not to favor its upcoming Internet TV service in ways that would likely violate net neutrality rules. On Monday, AT&T introduced its new Internet TV service, called DirecTV Now, with the exact kind of favoritism regulators had opposed.

But AT&T isn’t likely to get in much trouble. The wheels of justice at the Federal Communications Commission, which sent the letter, grind slowly. And advisors for the incoming Trump administration have already called for repealing the net neutrality rules, a move also favored by Republicans in Congress.

The companies most likely to be in trouble are AT&T’s competitors in the Internet video market. They can’t offer their customers the same deal DirecTV now subscribers will get without paying through the nose.

AT&T formally unveiled DirecTV Now at a media event in New York on Monday. The service offers over 100 channels of typical cable fare at a starting promotional price of just $35 a month. But the price goes up to $60 when the promotion ends, and there are a number of limitations on the service in the early going.

The controversy stems from AT&T’s decision that customers of its wireless service who sign up for DirecTV Now will be allowed to watch as much video on their phones as they’d like without counting against their monthly data allowances. AT&T t wireless customers who use competing services like Sony’s sne Vue or Dish Network’s dish Sling TV, don’t get the same benefit. Every bit of their online video viewing counts against their data caps.

None of AT&T’s three big content partners for DirecTV Now have made significant pushes into online TV services on their own. Comcast’s cmcsa NBCUniversal, Disney’s dis ABC and Twenty-First Century Fox’s fox Fox have preferred instead to partner with AT&T and others. The other major broadcaster, CBS, however, is an exception. CBS cbs does have its own Internet TV service, called CBS All Access, and it has not yet signed on with DirecTV Now. CBS declined to comment.

By doing so, the carriers benefit in two ways. Current wireless customers are more likely to use the carriers’ own video services over competitors. Plus, people who sign up for the video services may be more likely to pick the carriers for their wireless service. The FCC, which adopted the net neutrality rules last year to prevent systematic discrimination against any online content, hadn’t objected until the letter it sent to AT&T this month.

AT&T says zero rating is a benefit to consumers since it allows them to watch more video. And the practice isn’t discriminatory, the company argues, because competing services can get the same treatment if they agree to cover the cost of their customers’ data usage, as AT&T says it does for DirecTV Now. In a reply to the FCC last week, AT&T said it had “faithfully adhered” to the rules and maintained that the FCC’s interpretation was a “radical departure from established law.”

Fortune reached out to AT&T for comment on Tuesday and will update this story if a reply is received. The FCC is still reviewing AT&T’s response to its letter and had no further comment, a spokeswoman said on Tuesday.

The FCC and some outside observers have argued that the way AT&T is using zero rating is discriminatory. There is no cash cost to AT&T from zero rating its customers’ video usage, while competitors would have to pony up big bucks to get the same treatment, they say. The cost of matching the zero rating benefit alone could “render infeasible” other services’ attempts to match DirecTV Now’s $35 price point, the FCC noted in its letter.

The FCC, however, is about to undergo a braintrust transplant–one that is likely to help AT&T in this case. The letter challenging zero rating was written under the administration of FCC chairman Tom Wheeler, who was appointed by President Barack Obama, who was also a strong proponent of the net neutrality rules.

But within months, President-elect Donald Trump will appoint his own chairman of the agency. And in addition to his general hostility to government regulation, he has named two ardent opponents of the net neutrality rules to oversee his FCC transition team. Either of the transition leaders, Jeff Eisenach or Mark Jamison, could end up as FCC chairman.

And that would leave AT&T’s DirecTV Now with its big advantage—and competitors at a big disadvantage.

Israel’s Biggest Mobile Operator Launches on Apple TV

Cellcom, Israel’s biggest mobile phone operator, said on Monday it will offer Apple TV as it launched its new Cellcom TV app.

Cellcom said it will be the first in Israel to offer its multi-channel television, including broadcast channels and video on-demand content, on Apple TV’s streaming service at no extra charge.

Cellcom is a newcomer to the Israeli television market. Seeking new streams of revenue, it launched a low price, Internet-based service last year that competes with cable company HOT and satellite TV firm YES, a subsidiary of Bezeq.

Cellcom has now surpassed 100,000 subscribers, still well below YES and HOT. But Cellcom added 12,000 subscribers in the last quarter while the other two services lost clients.

How Booming Mobile Video is Pushing Carriers to Lower Quality

AT&T announced last week that it planned to degrade the quality of all streaming video for its mobile customers by default next year, though it would provide them with a free option to switch back to full quality video at any time.

In some ways, it’s another copycat move by a large carrier to duplicate a strategy of the smaller carriers Sprint and T-Mobile. AT&T and its even larger peer Verizon have copied one or both of the smaller carriers in eliminating two-year contracts, eliminating data overage fees in favor of slower data rates, and many other features.

T-Mobile first created a lower quality data option—which saves the carriers from having to handle massive amounts of wireless bandwidth—a year ago with its Binge On program. Video watched at the lower quality didn’t count against customers’ monthly data allowance. Then over the summer, both T-Mobile and Sprint created new, cheaper unlimited data plans that, in return for the price cut, automatically reduced video streaming quality.

Sprint CEO Marcelo Claure, defending the downgrade from high-definition video to DVD quality, said 90% of customers didn’t notice any difference in tests. T-Mobile tmus said when it offered customers a choice of watching higher quality video, 99% stuck with the lower setting.

That can’t help but have made an impression with execs at AT&T t and Verizon vz. After all, the booming increase in customers watching streaming video had been threatening to stress the capacity of all four carriers’ networks eventually. A study last year from Ericsson predicted mobile video would increase to 70% of all data traffic by 2021 from 50% in 2015 over the same period that overall data traffic is predicted to increase seven-fold.

The coming squeeze is likely to be more acute for the larger carriers. That’s because, with many more customers than the smaller carriers, AT&T and Verizon have less spectrum capacity per user. Verizon has just 1.02 MHz of spectrum per connection and AT&T has 1.18 MHz compared to 1.37 MHz per connection for T-Mobile and 3.64 MHz at Sprint, according to a review by Recon Analytics last year.

The next generation of mobile transmission technology, known as 5G, will offer relief from the squeeze with massively greater wireless capacity. But 5G is still three to five years—at least—from widespread adoption.

So reducing the quality of video that customers watch on their phone screens, where it’s much less obvious than on, say, a 60-inch television screen, is a savvy short-term solution.

The only potential glitch is that while T-Mobile and Sprint s offered customers concessions, such as lower prices or data usage exemptions, in return for downgraded video, AT&T isn’t offering its customers anything.

AT&T emphasizes that it is allowing customers to switch back to high definition video for free, while Sprint and T-Mobile charge more to move up from DVD quality on their new unlimited plans. But that ignores that the two smaller carriers cut prices when they introduced the plans in the first place. Sprint’s older unlimited plan, which did not reduce video quality, cost $100 a month versus $60 for the new plan, for example.

AT&T’s popular six gigabytes per month plan costs $80 monthly now and will cost the same when the carrier switches to downgraded video quality by default early next year.

Both smaller carriers have had success luring away regular, monthly phone customers from AT&T and Verizon by bashing their larger competitors for being less customer friendly. After AT&T announced the stream saver feature last week, T-Mobile CEO John Legere was bashing them again.

“How do we know what @ATT will do (wrong) a year from now? Just look at whatever we do now & make it suck,” Legere tweeted.

Time will tell whether the feature copying can continue without having an impact on price.

China Just Announced Tough Surveillance Measures for Streaming Video

Chinese internet authorities have formalized controversial rules regulating the country’s fast-growing live-streaming video industry, in a move that strips out smaller competitors and places hard-line surveillance measures on leading firms.

In an announcement posted on their website on Friday, the Cyberspace Administration of China grouped a handful of earlier restrictions under a final 24-point regulation that will come into effect on Dec. 1.

The rules require streaming services to log user data and content for 60 days, and work with regulators to provide information on users who stream content that the government deems threatening to national security or social order. Both users and providers are punishable under the regulations.

The law also codifies rules that ban online news broadcasting services from original reporting, requiring them to identify sources and non-selectively reproduce state-sanctioned information.

China’s live video streaming industry has experienced booming growth in the past two years as dozens of video and social media sites scrambled to add the updated capabilities to their existing services.

Credit Suisse Group analysts estimate the industry could top $5 billion by the end of 2017, driven by cheap bandwidth and a growing population of young mobile users.

The industry’s exponential growth attracted increased scrutiny from government authorities in 2016. In April, Chinese authorities called on 20 of the country’s top firms to join a self-criticism coalition, saying the industry was damaging China’s youth by proliferating content including pornography, fraud and terrorism.

On June 1 companies including Baidu bidu, Sina sina, Sohu.com sohu, and Youku Tudou yoku, acknowledged new rules as part of the group, including requirements for real-name authentication.

While the latest move places wide-reaching restrictions on the sites, it also signals an official sanctioning of the industry and its top players by Chinese officials.

Much like China’s earlier online video and music industries, the regulations put pressure on smaller competitors and bring larger firms into line with regulators, offering more growth opportunities for a smaller number of controllable companies.

“One of the things the government always wants to do is narrow the playing field to a smaller number of higher profile known entities, ideally ones that have a better track record of cooperating with the government,” says Mark Natkin, Managing Director at Marbridge Consulting.

“In the long run it’s actually relatively beneficial to the large companies.”

In May the government handed down 588 licenses for prominent media outlets and live-streaming sites, effectively banning all unapproved services.

Why Regulators May Zero In on Zero Rating in AT&T-Time Warner Deal

One of AT&T’s top strategies for promoting its video services may come under extreme scrutiny as regulators review its bid to acquire Time Warner.

The carrier currently allows its millions of wireless subscribers to watch video from its DirecTV service on their phones without counting against their monthly data caps. Known as “zero rating,” the same strategy is used by Verizonvz when customers watch its Go90 or NFL football apps. And AT&T has said it plans to give the same treatment to its new low cost Internet TV service, DirecTV Now, when it debuts later this month. If the merger is approved, AT&T could also use zero rating to promote popular Time Warner content, like HBO’s Game of Thrones or basketball games on the TNT network.

Critics say that zero rating effectively gives an unfair advantage to the carriers’ own video content in competition with all the other Internet video services like Netflixnflx, Google’s googl YouTube, and Amazon’s amzn Prime Video.

But the Federal Communications Commission, which imposed net neutrality rules on the wireless industry last year, has yet to push back on zero rating.

The Time Warner merger review, however, will give critics a new platform to present their objections. The $109 billion deal will be reviewed by the Department of Justice and the FCC. The FCC has previously said it was informally reviewing zero rating practices.

On Wednesday, the Wall Street Journal reported that some FCC staffers already see AT&T’s plan of zero rating of the upcoming DirecTV Now service as improper, citing unnamed sources. Of course, FCC staffers don’t make the final decision in such situations. The five members of the commission, led by chairman Tom Wheeler, will make the final call.

The FCC did not respond to a request for comment.

AT&T t argues that the Time Warner twx merger doesn’t change the zero rating situation at all. With or without the merger, any other video service can pay to “sponsor” its streaming content so that it won’t count against viewers’ data allowances on AT&T’s wireless network, the carrier said.

“We welcome any video provider that wishes to sponsor its content in the same way and on equal terms,” Bob Quinn, AT&T executive vice president, said in a statement. “Sponsored data is an incredibly popular service that we hope regulators won’t take away from the tens of millions of people who enjoy it today from several different companies.”

Of the regulatory review, Quinn said: “The FCC has been monitoring current sponsored data offerings on an industry-wide basis, and because those offerings benefit consumers, we don’t expect the FCC to act rashly in this area.”

More TV Networks Just Signed on to Hulu’s New Live-Streaming Service

Hulu just took a major step toward becoming a premiere live-TV streaming service.

The streaming video site racked up another big deal with major TV networks for its live-TV streaming service that will launch next year. Inking a deal with Walt Disney and 21st Century Fox that will add more than 35 TV networks, including ABC, ESPN, and Fox, Hulu is ensuring it will be a major player in a crowded field vying for cord-cutters. It’s also further upending the traditional TV landscape.

The new deals follow another agreement Hulu signed with fellow parent company Time Warner, which brought on board channels such as CNN, TBS, and TNT. (The deal with Time Warner came as part of that company’s agreement to buy a 10% stake in Hulu for $583 million, in August.)

Hulu confirmed in May that it plans to offer a package of live programming in 2017 from broadcast and cable networks with a reported $40 monthly subscription price.

Hulu currently offers on-demand video content from current and past series, most of which are owned by its parent companies, with roughly 12 million subscribers who pay as much as $11.99 for a monthly subscription. (Like rivals Netflix and Amazon, Hulu also produces its own original content.) In addition to the 10% stake owned by Time Warner’s Turner Broadcasting System, Disney, 21st CenturyFox, and Comcast’s NBCUniversal each own a 30% stake in Hulu.

In a press release on Tuesday, Hulu described its live TV streaming service as “a complement” to its current on-demand service.

Securing a deal with Disney and Fox is a big win for Hulu’s planned live-streaming service, adding the premiere cable sports network, in ESPN, along with the Fox Sports networks. And, in addition to the major broadcast networks ABC and Fox, the deal also includes live content from FX, FXX, Fox News, and the Disney Channel, among other networks.

Hulu CEO Mike Hopkins called the Disney and Fox channels “essential” to his company’s plans. Hopkins said in a statement: “We’re building a service that offers subscribers the most sought-after programming on television . . . With these two new deals in place, and additional partners to come, Hulu will soon give TV fans of all ages live and on-demand access to their favorite programs in a whole new, more flexible, highly personalized way.”

Hulu’s close ties to content providers like Disney, Fox, Time Warner, and Comcast could give the streaming service a leg up in what is shaping up to be a competitive field.

The video streaming company also said it was getting ready to spend $6 billion on content next year, up $1 billion from 2016.

“The benefits of NFLX-produced original content including attractive economics and greater control are clear and we believe returns on original spend are high,” J.P. Morgan Securities jpm analyst Doug Anmuth said in a research note.

The company added about 3.20 million subscribers internationally in the third quarter, compared with the 2.01 million average analyst estimate.

In the United States, Netflix added 370,000 subscriptions, compared with analysts’ estimate of 309,000, according to research firm FactSet StreetAccount.

Though the company’s stock has fallen nearly 13% this year, it still trades at 356 times forward earnings, versus the peer median of 5.88.

The second season of Narcos” a Netflix original show on Colombian kingpin Pablo Escobar, has proved highly popular, following up on the success of Orange is the New Black and House of Cards.

The company plans to launch The Crown, a show about the reign of Queen Elizabeth II.

Netflix plans on releasing over 1,000 hours of original programming in 2017, up from 600 hours this year.

“This is unprecedented growth that should drive a substantial improvement in the breadth and depth of content on the service, which should provide a tailwind to subscriber growth in 2017,” said Pacific Crest analyst Andy Hargreaves.

The company said it now expects a higher free cash flow burn at $1.5 billion in 2016 as producing original content consumes more cash up front.

The company, which faces competition from the likes of Hulu and Amazon.comamzn, said it would likely tap the capital markets to fund spending on original content.

Republican Senator Asks Trump to Step Down Via Facebook Live

Hours after tapes surfaced of GOP nominee Donald Trump using vile language to describe his enthusiasm for sexual assault, Republican Senator Mike Lee has called for him to step down as the Republican nominee for President. But instead of taking his thoughts to a news network, Senator Lee delivered his message directly to the public in a Facebook Live video recorded from his Utah home.

Appearing extremely composed, but not entirely scripted, Lee said: “It’s occurred to me on countless occasions today that if anyone spoke to my wife, or my daughter, or my mother, or any of my five sisters, the way Mr. Trump has spoken to women, I wouldn’t hire that person, wouldn’t want to be associated with that person, and I certainly don’t think I’d be comfortable hiring that person to be the leader of the free world.”

The video, posted late Friday night, had racked up nearly 200,000 views by Saturday morning. Notably, online reactions to Lee’s statement have been overwhelmingly positive—at worst, commenters criticize Lee for not doing something similar sooner. Also worth noting here is that Lee himself was first elected in 2010 as part of the Tea Party wave, a Republican insurgency that shared many populist and libertarian positions with Trump.

Addressing fellow conservatives, Lee said that “we’ve been asked to settle, on matters of great principle, with our candidate for President of the United States. This can’t continue.”

In Trump’s own video responding to the unearthed tape, the candidate described the furor over his comments as a “distraction.” But Lee (by this point barely containing his anger) responds: “With all due respect, you, sir, are the distraction. Your conduct, sir, is the distraction. It’s the distraction from the very principles that will help us win in November.”

“It’s for precisely that reason, Mr. Trump, that I respectfully ask you, with all due respect, to step aside. Step down. Allow someone else to carry the banner of these principles.”

For more on Trump, watch our video:

In addition to its political implications, Lee’s statement is the latest sign of the vibrancy of Facebook’s live streaming service as a forum for debate and newsmaking. Without the service, Lee would doubtless have turned to a traditional media outlet such as CNN or Fox News to make his statement.

Lee’s comments come amid a torrent of similar online responses from Republicans. On Twitter, Trump’s former primary rivals described the comments as “indefensible” and “reprehensible.” Conservative commentator Bill Kristol, never a Trump partisan, called for a “Republican revolt” against the candidate. Illinois Republican Senator Mark Kirk had easily the most pointed response, calling Trump “a malignant clown.”

Trump: "I am your voice."Not my voice. Not most Americans' voice. Isn't it time for a Republican revolt against his remaining GOP's voice?

Trump-Clinton Debate Could Get Super Bowl-Sized Ratings

Football will be on TV this Monday evening, but the NFL won’t be the main draw.

The Monday-night matchup millions of Americans have been waiting months for is the first presidential debate between Donald Trump and Hillary Clinton, which takes place Sept. 26 at Hofstra University in New York. Considering the massive ratings networks saw during the presidential primary debates and the intense media buzz around this year’s wild election, some experts are predicting that Monday’s event could pull in more than 100 million total viewers.

That would easily make it the most-watched presidential debate in history, and it could even rival the ratings of what is usually the year’s biggest TV event: the Super Bowl.

Trump helped boost ratings to record levels during the primary debates. In August, Fox News drew an all-time record 24 million viewers to its GOP primary debate, while several other networks set debate ratings records throughout the primary season. Considering that the fervor around the primaries followed the two remaining major-party presidential candidates through the summer, it’s no surprise ratings expectations are high for the first of three scheduled, 90-minute debates.

Bloomberg noted over the summer that the first Clinton-Trump face-off has potential to smash viewership records for any live televised event (the 2015 Super Bowl’s average of over 114 million viewers currently holds the title). At the very least, it seems like a good bet to top the previous ratings record for presidential debates, set in 1980, when 80.2 million people tuned in to watch the first debate between Ronald Reagan and Jimmy Carter. Four years ago, President Obama and Mitt Romney scored the highest ratings since the Reagan-Carter debate, pulling in more than 67 million for their first debate. (Nielsen even reported that the first Obama-Romney meeting actually topped the 1980 debate in terms of the number of households tuning in, as opposed to overall viewers.)

If Monday’s debate does, in fact, top 100 million viewers, that would represent a roughly 50% spike over the top-rated Obama-Romney meeting in 2012.

As usual, the debate will air across several broadcast and cable networks—ABC, CBS, FOX, NBC, C-SPAN, and all major cable news channels—and there will also be several live streaming options, including on YouTube, BuzzFeed, Twitter and a joint stream from ABC News and Facebook.

On one side of the podium on Monday night will be Trump, the real estate mogul and former reality TV host with a propensity for hurling insults and enflaming rhetoricat his opponents. The GOP nominee has repeatedly asserted his belief that the debate, and the entire election process, is “rigged” in favor of Clinton, whom he refers to as “Crooked Hillary.” Trump has also further riled up his supporters with claims that he won’t get a fair shake from the first debate’s moderator, NBC News anchor Lester Holt, who Trump alleged is a Democrat. TIME reports that Holt is actually a registered Republican.

In other words, people expect fireworks and that should mean huge ratings.

Not only could the first Clinton-Trump debate aspire to Super Bowl-level ratings, but the debate is also expected to cut into the NFL’s ratings for Monday Night Football, which will air a matchup between the New Orleans Saints and Atlanta Falcons at the same time on ESPN. (For what it’s worth, those two teams have only one win between them this season.)

The Wall Street Journal recently reported that ad buyers are expecting as much as a 20% drop-off in MNF viewership (the broadcast averaged 12.9 million viewers per game last year).

While that ratings dip could hurt ESPN, the networks airing the debate are reportedly having no trouble selling advertising, even though the 90-minute event will be commercial-free. The Journal notes that networks are easily selling out their ad space for immediately before and after the debate, with 30-second spots going for as much as $250,000.

Why Cord-Cutters Might Like AT&T’s Upcoming Internet TV Service

AT&T’s soon-to-debut Internet TV app isn’t meant to steal customers from its DirecTV satellite service or its U-verse cable TV package. The goal—at least at the start—is to woo viewers who have opted out of the traditional pay TV ecosystem.

But CEO Randall Stephenson says he won’t be disappointed if the new service is good enough to reach beyond cord-cutters and even attract some current pay TV subscribers.

“There is risk of it cannibalizing the existing product. I think that, though, is a good sign,” said Stephenson on Wednesday while speaking at the Goldman Sachs Communacopia conference in New York. “You launch products that are disruptive in the marketplace, and if you don’t see them threatening your legacy product sets, 99 times out of 100, it doesn’t go anywhere.”

None of the current Internet TV offerings, such as Sony’s Playstation Vue service, has quite taken the world by storm. People avoiding traditional cable seem more interested in free-form services like Netflixnflx and Amazon’s Prime Video—which were conceived for the Internet—than services that bundle a bunch of cable channels and come across as a slightly cheaper repackaging of old-fashioned pay TV offerings. Verizon Communications has pursued the video opportunity by trying to develop a more digital-friendly service called Go90, though it also has yet to show much success.

Still, AT&T is going the traditional route and will unveil the service in the fourth quarter, Stephenson said. The primary offering will be called DirecTV Now and come with over 100 channels. A more affordable offering, called DirecTV Mobile, will combine premium video with made-for-digital content. And a free offering called DirecTV Preview will offer some shows from the other apps but with advertising.

The main offering will be “100 plus channels at a very, very aggressive price point,” Stephenson explained on Wednesday. And for AT&T wireless subscribers, Stephenson continued, watching the service won’t count against a customer’s monthly data allowance—a somewhat controversial practice known as zero rating.

AT&T hasn’t said much previously about how much it plans to charge. Sony’s sne 100-channel tier of its Playstation Vue Internet TV package costs $45 a month. Dish Network’s dish Sling TV starts at $20 to $25 per month with many fewer channels and a bevy of optional add-on channel packages that cost $5 and up. And, of course, the average traditional cable TV subscriber pays over $100 a month.

All the services are hoping to get a chunk of the increasing number of people who have opted to drop cable or cut back significantly on their pay TV spending. About 20% of all households will have opted out of the pay TV ecosystem by 2018, according to eMarketer.

For more about Dish’s Sling TV, watch:

AT&T’s Internet TV service has already signed up Disneydis, Time Warner’s twx HBO and Turner Networks, and Comcast’s cmcsa NBC Universal. The company is using its sway as the largest provider of traditional pay TV, with some 25 million subscribers, to cut better deals. “We have been very aggressive over the last year accumulating the content rights to distribute across all platforms,” Stephenson said.

The company has completed about 90% of the content agreements it needs, but “there are a couple of key ones that we’re still working on,” Stephenson said. The CEO didn’t name names, but AT&T t hasn’t announced a deal with CBS, for example.

Whether the grand package will be just what the cord-cutters are looking for remains an open question.